Question

7)    On January 1, Tiger Corp. paid $66,000 cash for machinery that was expected to last for 11 years.

a) Is the machinery a current asset or a long-term asset? Why?

b) Give Tiger’s journal entry to record the purchase of the machinery.

c) Give Tiger’s journal entry to record depreciation expense on the machinery for the first year.

d) Give Tiger’s journal entry to record depreciation expense on the machinery for the second year.

e) What is the balance in accumulated depreciation at the end of the first year? At the end of the second year?

f) What is the net (book) value of the machinery at the end of the first year? At the end of the second year? At the end of the 11th year?

Answer 1

a) Current assets means assets that are expected to be converted to cash within a year.. This machinary have a life 11 years. So it will be long term assets

b)

Machinary	$ 66,000
Cash		$ 66,000

c)

Depreciation expenses ($66,000/11)	$ 6,000
Accumulated depreciation - Machinary		$ 6,000

d)

Depreciation expenses ($66,000/11)	$ 6,000
Accumulated depreciation - Machinary		$ 6,000

e)

Balance in accumulated depreciation at first year	$    6,000
Balance in accumulated depreciation at 2nd year ($6,000*2)	$ 12,000

f)

Cost of machinery	$   66,000
Less: Accumulated depreciation at 1st year	$   (6,000)
Book value at first year	$   60,000
Cost of machinery	$   66,000
Less: Accumulated depreciation at 2nd year	$ (12,000)
Book value at 2nd year	$   54,000
Book value at 11th year	$               -